Red-hot tech stocks aren't as expensive as they look

Business Insider executive editor Sara Silverstein speaks with Brian Levitt, the senior investment strategist at OppenheimerFunds. He notes that the market has been favoring growth stocks like the FANG group, rather than their value counterparts, because we've been in a slow economic growth environment. He then goes on to say that he favors looking at a measure like price-sales ratio when assessing companies like Amazon, because they're a better predictor of future returns. Using that, a lot of stocks that look expensive are actually reasonably priced.

Following is a transcript of the video. This transcript has been lightly edited for length and clarity.

Sara Silverstein: When you look at the individual stocks, do you see any standouts that are overvalued or undervalued?

Brian Levitt: Well the market has been favoring growth in a slow growth world, rather than value stocks. It's sort of paradoxical: when there's no growth you buy growth, when there's a lot of growth you buy value. So since we've been in this slow growth environment, investors have been bidding up those names that are growing. In the US, it's the so-called FAANG stocks - Facebook, Apple, Amazon, Netflix, and Google. But also, if you were to compare those stocks to some of the valuations of some of the bellwether stocks of the 1990s - Intel, Oracle, EMC, Cisco, Microsoft - their valuations are also not even close. Some might push back and say well, Netflix, Amazon, on a price to earnings basis, are very expensive. I would tell them to look at a price to sales basis on Amazon, which by the way is a better predictor of returns. On a price to sales basis, Amazon is pretty reasonably priced. That's not necessarily a stock suggestion, it's just simply saying that you need to look a little bit deeper than come up with these hyperbolic statements that the FAANG stocks are overvalued. It's simply not true.